Hours after the Government filed before the Congress of the Republic the project of the General Budget of the Nation by 2026, The Autonomous Committee of the Fiscal Rule (CARF) issued a previous concept unfavorable to the proposal of the Ministry of Finance and Public Credit (MHCP), and subsequent decision of the Superior Council of Fiscal Policy (CONFIS), to modify the fiscal plan of next year.
(Read: How much will the Government allocate in the General Budget of the Nation?).
In the opinion of the carf, There is no valid justification so that, just a month after the publication of the medium -term fiscal framework (MFMP), the level of expenditure and primary deficit is increased by 2026.
According to the CARF document, on July 28, the Confis decided to adjust the financial plan of 2026. According to Minhacienda, the decision is due to the need to increase the expenditure projected by 2026, in view of the identification of new budget inflexibility and the intention of raising the resources for investment.
The new scenario approved by the CONFIS for 2026 maintains unchanged the fiscal deficit programmed in the medium -term fiscal framework (MFMP) published in June (6.2% of GDP), but increases the primary deficit (that is, the difference between income and expenses excluding interest) to 2% of GDP, from 1.4% projected a few weeks ago.
(See: Government would seek new financing law to square the accounts next year).
The CARF explained that with the decision, the primary expenditure increases by $ 18.2 billion (0.9pp of GDP) compared to the estimated in the MFMP. According to Minhacienda, $ 7.2 billion of the increase in spending would be oriented to health insurance, $ 5.7 billion to energy and gas subsidies and $ 5.9 billion to investment. Other items would be reduced by $ 0.6 billion.
The fiscal scenario modified by the Confis and consisting of the PGN 2026 position for the Congress of the Republic, also contemplates higher income against MFMP for $ 8.2 billion and lower interest expense for $ 10 billion.
Colombian money
Carlos Ortega – Portfolio
Problems in the fiscal planning process
In the case of income, the government now provides for the approval of a financing law for $ 26.3 billion, that is, $ 6.7 billion more than estimated in the Ministry of Finance.
The scenario also includes higher capital resources than in the Ministry of Finance for $ 1.8 billion, and a downward review of the non -oil tax collection of $ 0.3 billion.
Regarding the estimation of interest spending, the Ministry of Finance argues that the reduction against MFMP is explained by changes in the strategy of placements of sovereign debt titles and debt management operations.
(Besides: The Government is committed to a budget of $ 557 billion for 2026).
In view of the change to the tax plan of 2026, within the framework of the activation of the exhaust clause for validity 2025 to 2027, the norms establish that the CARF must send a concept prior to the confisulous decision, as effectively happened. The concept was requested on Friday, July 25 and sent to the Ministry of Finance on Sunday, July 27.
CARF considered that modifying the tax plan of 2026, just one month after publishing the medium -term fiscal framework, reflects serious and new problems in the country’s fiscal planning process. The above is especially worrying because it occurs in a critical and unprecedented fiscal situation.
The discrepancy between the primary expenditure established in the medium -term fiscal framework and the one approved in the PGN stage has been atypically high in 2025 and 2026.
Between 2020 and 2024 the average difference between the primary expenditure projected in MFMP and PGN was $ 500 billion (0% of GDP), while the discrepancies observed in 2024, for the PGN of 2025 and now in relation to the PGN 2026 VIS A VIS el MFMP version 2025, are $ 23.9 billion (1.3pp of GDP) and $ 18.2 billion (0.9pp of the GDP), respectively.
In addition, at the MFMP 2025 presented in June, the Government made the commitment to present an Austere PGN 2026, without growth beyond the expected inflation by 2025, but the proposal implies a growth of 4.6 percentage points -PP- above the inflation predicted by the MHCP.
Autonomous Fiscal Rule Committee – CARF
Courtesy – API
It demands transparent explanations
For the CARF, the changes of the tax strategy of 2026, without presenting any extraordinary event outside the government control, requires transparent explanations. The opposite undermines confidence in institutionality, fiscal planning instruments and in the Public Finance Adjustment Plan.
Historically, the MFMP has been an important instrument that establishes the road map of the government’s fiscal policy. These types of decisions blur its relevance. After the suspension of the fiscal rule for validity 2025 to 2027, recovering confidence demands more forceful measures and a firm commitment to the goals established by the confis in the medium -term fiscal framework.
That the first fiscal policy decision is to increase the imbalance of public finances in 2026, is against that purpose. It is concerned that the new fiscal strategy intends to finance persistent expenses via transient or uncertain sources; Everything else constant, structural imbalance would be increased.
Considering the explanations of the MHCP, the lowest interest expense in 2026 is possible, but derived from mainly accounting and temporary factors. It is even possible that the cost of public debt increases in the subsequent years.
The only way to structurally reduce the burden of interest is through signals (and decisions) of reduction of fiscal unbalance.
In addition, additional capital resources (compared to MFMP) are at once, the financing law is, for now, an uncertain plan, and the greatest collection that the government expects to obtain via improvements in the efficiency of the DIAN, as well as the tools that would allow it, are about to be seen. If transient measures to increase sources were used to reduce debt, a positive signal would be given.
There is no clarity about the content or viability of the government’s contingency plans if all the planned sources do not materialize. If, as the MHCP argues, the increase in spending responds predominantly to the identification of new inflexible items, it will be difficult to make a cut equivalent to the programmed uncertain income, which limits the maneuver margin of that possible contingency plan.
For the MHCPthe increase in discretionary investment expenditure is based on the National Development Plan is a legal mandate.
But this cannot be affirmed if tax sustainability is put at risk that is a constitutional principle; The PND PLURIANUAL PLURIANUAL PLAN is indicative, subject to the viability of its financing.
(Here: Fiscal goals of the Petro government would only be achieved under ‘a more responsible government’).
The change in the tax scenario increases the difficulty of complying with the primary deficit goal of 2027 and to resume the parametric fiscal rule of 2028 onwards. According to the MFMP, the primary deficit should be reduced from 1.4% of GDP by 2026 to 0.3% of GDP in 2027, a 1.1pp decrease from one year to another; With the change in the adjustment plan now the primary deficit should adjust 1.7PP of GDP in a year.
If, as a consequence of the new government signals, the debt is increased (for example, because the financing costs increase), the fiscal adjustment required to return to the fiscal rule in 2028 will increase against what the MFMP contemplates.
With the modifications to the financial plan of 2026, consisting of PGN 2026, now the CARF estimates in its base scenario that the missing resources to meet the 6.2% fiscal deficit goal is $ 38 billion, equivalent to 2PP of GDP. The required adjustment corresponding to the MFMP stage was $ 33 billion (1.7PP of GDP), according to the calculations that the Committee had in June 2025.
Finally, for carf “There are factors that could increase the missing in 2026, such as the Budget Reserve to be constituted in 2025 and executed in 2026, the entry into force of the pension reform, and possible adverse effects that the adjustment in the fiscal strategy can produce in the debt costs. Congress is expected to examine in detail the amount of the PGN 2026, in the light of the constitutional principle of tax sustainability, and that the Government evaluates the Government Together measures to increase income and reduce spending and their inflexibilities from 2026 “.
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